Spanish-speaking families are receiving special help in their efforts to purchase and finance a home of their own. This includes a widening variety of mortgage plans and other areas of support. An example of this emerging trend is a new program announced by Freddie Mac, one of the nation’s largest buyers of existing home mortgages and supplier of funds for new loans. This organization is now providing mortgage lenders with tools that address one of the most common barriers to home-ownership among the Spanish-speaking community lack of information in their own language.
Freddie Mac is now developing bilingual security instruments, notes and other mortgage documents in English and Spanish. They are also producing bilingual consumer education brochures that explain each step taken in applying for and processing a mortgage. The educational materials include a primer on the importance of credit, and continues with a series of bilingual brochures that explain the lending process. The materials are provided to lenders for distribution to interested consumers, and are made available to community organizations.
The materials also address common misconceptions about banking and homeownership, and help consumers better understand their rights and responsibilities. Each of the educational pieces is formatted with corresponding English and Spanish text. Freddie Mac has long been committed to working with our lender customers to increase home-ownership among the fastest growing segment of the population Hispanic and Latino families, said the vice president of Housing and Community Investment for Freddie Mac. In the next decade, nearly a third of first-time homebuyers will be of Hispanic and Latino background. Bilingual mortgage documents are a critical step in helping these families become homeowners.
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Investors Turning to Real Estate
An increasing number of investors are becoming disillusioned with the volatile and often sluggish stock and bond markets and are diverting their funds into real estate investments. This trend has stock-bond financial market brokers and advisors worried. I recently participated in a telephone press conference, sponsored by the Zero Alpha Group (ZAG), a network of eight major independent investment advisory firms. The primary purpose of the conference was to publicize what they say are dangers of investing in real estate in 2005 an apparent attempt to turn back the flow of investment funds to stocks and other financial market vehicles.
However, some of the comments and suggestions offered by these financial wizards were very helpful and insightful for persons intent on participating in real estate investments. Here is a sampling of their comments: Continued weakness in the stock market means more and more investors are tempted to liquidate some or all their investment portfolios in order to pour their savings into such things as vacation homes, farmland, rental apartments and even airport hangars, one of the experts said. While real estate is an integral part of a globally diversified financial portfolio, it’s not the `magic bullet to investors who are frustrated with sluggish stock market returns.
The group did have positive things to say about Real Estate Investment Trusts, a popular way to benefit from participating in ownership of large properties. Not only are REITs a helpful tool in portfolio rebalancing, they can generate much-needed cash flow and, at the moment, are posting good yields. With a total return of 30.4 percent, REITs last year outpaced most other stock market benchmarks for a fifth consecutive year. REITs over the last five years have produced a compound annual total return of 22.5 percent, putting them ahead of the compound annual returns for the S&P; 500, the Dow Jones Industrial Average and the Nasdaq.
They also took a positive view of managed pool real estate investments. Exposure to real estate also can be gained through direct ownership in a managed pool that focuses on real estate. This approach can be broadly diversified, thus it has a very low standard deviation. Also, owning real estate through a managed pool gives financial professionals a higher comfort level because they can get a clear sense of the credit and administrative processes behind the investment, which may be particularly important in a `down market in real estate
Participating as speakers at the ZAG news conference were James Wilson, president of J.E. Wilson Advisors; Steven Lugar, managing director of BHCO Capital Management, Inc.; and Phil Kruzan, director of financial planning for The Foster Group.
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Growing Number of Second Home Buyers
More people are purchasing and financing second homes this year than ever before. And the key motivating factor is the investment value of these properties. In a recent study, it was found that 81 percent of survey respondents plan to buy a second home, an increase of about 13 percent over a year ago. Of those who indicate a plan to buy a second home, 41 percent say they will definitely buy within the next two years.
The most frequently expressed reasons for their interest in buying a second home are (1) investment potential, (2) a good residence for future retirement years, (3) use as a vacation residence. Factors most often considered in selecting the location for a second home are (1) proximity to recreation facilities, (2) warm climate, and (3) and an area with a strong rental market.
With a higher comfort level about flying, more than a third of those persons considering the purchase of a second home are now willing to fly to the location of the property. About 57 percent prefer to drive. About 60 percent of respondents plan to buy a second home more than 500 miles away from the primary home. The demographics of the second home buyer have shifted slightly in recent months. The survey found that the number of married people looking for second homes increased by nearly 10 percent, and the number of people with incomes over $100,000 increased by 26 percent.
The age distribution has also changed. The new survey shows a decrease in the 45-54 year old group, and an increase in the two age brackets below and above those ages. About 75 percent of respondents have either a college or advanced degree. The survey was conducted by EscapeHomes.com, a Website focusing on this type of property.
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New Program for Limited-Credit Mortgage Borrowers
Many low- and moderate-income families, like those working as policemen, firefighters, teachers and healthcare workers, can now take advantage of the new Home Possible Mortgages, offered by lenders approved by Freddie Mac, one of the nation’s largest investors in residential mortgages. It’s a new suite of low downpayment mortgage products with flexible credit underwriting standards. It’s expected to help thousands of families with savings issues or imperfect credit become homeowners.
We created this new program so more lenders can say `Yes to more borrowers, said David Stevens with Freddie Mac. It’s what our lenders tell us they need to compete in today’s market a flexible, easy-to-use mortgage uniting ease and efficiency with low downpayment requirements and flexible credit. Perhaps no other mortgage product launched in recent memory will enable our lenders to reach and help as many additional borrowers as will this Home Possible offering
The new program involves borrower education and early delinquency counseling. It includes zero and three percent downpayment mortgage products and very flexible credit requirements so low- and moderate-income borrowers can get an affordable, low-cost conforming conventional mortgage for a single family property with as little as $500 of the downpayment or closing costs coming from their own funds.
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New Home Production down
The production of new homes during the first two months of this year fell short of expectations due to severe snowy conditions in the Midwest and Northeast. In January, there was a 9.2 percent decline in sales of newly built single-family homes compared with the previous month, but demand for new homes remains strong, according to the National Association of Home Builders.
On balance, the housing market is still definitely in good shape, due to continuing low mortgage interest rates and solid growth in employment and household income. It bodes well for home builders in the months ahead, said David Seiders, NAHB’s chief economist. Last year’s record-breaking home sales resulted in 1.2 million sales. That’s 10.5 percent ahead of the previous record set in 2003.
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Growing Influence of Mortgage Servicers
Mortgage loan servicers (the folks who receive and process mortgage loan payments) are the ones who win the contest for customers loyalty in the long run, according to the J.D. Power & Associates just-concluded Home Mortgage Study. A far greater number of consumers name their mortgage servicer as their mortgage company than the lender or brokerage firm that originated their mortgage.
When asked, Which do you think of as your mortgage company?, 76 percent of consumers named their mortgage servicer, while 24 percent named their mortgage originator. The stakes are high for achieving customer loyalty and satisfaction, because satisfied customers are much more likely to recommend doing business with a lender. By contrast, dissatisfied customers can become word-of-mouth terrorists for a lender or broker, the study report noted.
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New Mortgage Servicing Designation
A new professional designation to recognize residential mortgage servicers has been implemented by the Mortgage Bankers Association. The designation is identified as Certified Mortgage Servicer (CMS). It’s being introduced by CampusMBA, the educational arm of MBA.
Servicing is a vital mortgage related function, said Dan Thoms, vice president of MBA Education Development. With the new CMS designation, those individuals performing these tasks now have the opportunity to be recognized for their professional excellence, whether they provide customer service, manage investor accounting, or minimize defaults.
Courses will be offered to qualify individuals and firms for the designation. The educational programs will be produced by CampusMBA in conjunction with Fidelity Information Services, a division of Fidelity National Financial. Together they are developing content for the servicing-focused courses that compliment existing curriculum and that can be universally applied to all services and servicing systems across the industry.
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Condo / Townhome Sales Growing
Sales of condominiums and townhomes has reached record levels. Their growth in popularity has far surpassed previous predictions. These residential properties attained their ninth consecutive annual sales record last year. Sales in 2004 were up by 8 percent over the number of units sold the previous year. And the growing sales pace is continuing in 2005. Condo values have been appreciating (increasing) faster than values of single-family homes in recent years.
Several factors are contributing to the growing sales activity of condos. With the escalating prices of single-family homes, many prospective buyers (particularly young first-time buyers) are opting for a lower cost condo residence. However, with their rapid rise in condo values, the difference in price levels is narrowing.
Condos have also becoming the top preference of empty-nester retiring people who want to scale down the size of their residence and simplify upkeep responsibilities. And there is an increasing number of singles, particularly single women, who prefer a condo purchase. Also, there are an increasing number of luxury condo developments entering the market. These are large units with many amenities. In some cases, homebuyers are moving up from their single-family home to a luxury condo.
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Record-Breaking Home Price Increases
Several other records are being established in the real estate marketplace. For example, the number of metro areas showing double-digit annual price appreciation for existing homes is at an all-time high, according to the National Association of Realtors. NAR’s fourth-quarter (2004) home sales report shows 62 areas (from 129 areas covered) with double-digit annual increases in median existing-home prices. The previous record was 49 metro areas showing double-digit price appreciation. That was in the second quarter of last year.
Another record year may be achieved by home builders this year. Builders are striving to keep up with demand, despite weather-related problems. With mortgage rates and other market conditions still very favorable builders see strong months ahead this year, said Dave Wilson, president of the National Association of Home Builders. There’s no question this is a demand-driven housing market right now and that builders are reacting to it. The single-family market, in particular, is crying out for supply, and increases in house prices are symptomatic of a market that’s being buoyed by demand while constrained by land-use controls in many areas, he said.
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MBA Battles Fraud Against Mortgage Lenders
A special gathering of mortgage and real estate leaders has been organized by the Mortgage Bankers Association to discuss ways to Combat Mortgage Fraud Against Lenders. The sessions will be held March 10 at the Mayflower Hotel in Washington, D.C. The keynote speaker will be Chris Swecker, with the Criminal Investigative Division of the FBI.
The real estate finance industry has proven to be the backbone of the U.S. economy, and homeownership is one of the keys to wealth for most families, an MBA report stated. Yet, the fraudulent acts of a few can threaten the stability of the system for all. Fraud against mortgage lenders can be financially devastating to lenders and consumers alike.
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Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers along with freelance features. Reproduction of this report, in part or entirety, is prohibited without the express permission of the author. E-mail: storyjim@aol.com. Web site: www.jimwoodard.net/.